Friday, May 4, 2007

Five Cent Nickel and Saving

The personal finance blog Five Cent Nickel is running a give away this week. In return for writing a review or responding to a previous post and linking to his website, people are entered for a plethora of prizes. I have been considering getting an ipod and I've been flirting with becoming a more serious PF blogger, so this could do both of those while also providing publicity to an excellent site. Very shrewd way to increase readership, too, I might add.

Anyways, a while back, Nickel posted about where people should focus to save money, large purchases or small purchases. He came down on the side of saving a small amount on numerous small purchases, but the topic is rather difficult. Since I've started to track where all my money is going on a daily basis, I've found plenty of ways to painlessly cut back on spending. Eating lentils a few more times a week instead of fresh vegetables lowered my grocery bill. Soda, a normal beverage when eating out, not only raised the cost of my meals out while adding nothing substantial, but also gave me empty calories. These and other eliminations were all low hanging fruit. I barely notice they're gone.

To me, larger purchases are harder to say no to. I have a friend getting married in Hawaii. I'm not in the wedding, but I couldn't bear to say no when she was so excited, so now I find myself "needing" to pay for a plane ticket, hotel, food, and transport in Hawaii. For the month of May my miscellaneous spending category is huge because I can't say no when my siblings ask to go in together on an extravagant Mother's/Father's Day gift. I have the money and feel miserly saying that I was meaning to save that money instead.

Although the denials in the small spending category and acceptances in the large spending category seem unrelated, they are both sides of the same guilt coin. Depriving myself is perfectly acceptable while disappointing others is much more difficult. Small spending purchases rarely seem to affect others, while larger outlays much more often involve to feelings or perceptions of others. In this case, it makes sense for me to save in the everyday situations in order to hopefully allow the larger financial decisions to be less guilt-ridden. For other people, the reverse may be true; turning down lunch with coworkers may be much harder than putting the kids' riding lessons on hold.

Through it all, what really matters is that people are trying to save in one of the categories, and not blowing it completely in the other. The only way to save is to cut consumption somewhere, as unfun as it may be.